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Subject - Economics:

Macroeconomics

MCQ - 65-4075

Question:

If households are more optimistic about the future, how would the consumption function be affected?

  1. The marginal propensity to consume would increase, increasing the slope of the consumption function.
  2. The entire consumption function would shift downward.
  3. The entire consumption function would shift upward.
  4. The entire consumption function would shift downward.
  5. The marginal propensity to consume would increase, decreasing the slope of the consumption function.

Correct Answer: C

Explanation:

Greater optimism shifts the consumption function upward. The MPC is unchanged.

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269 MCQ for effective preparation of the test of Macroeconomics of Economics section.

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